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Are you aware of how much you are paying in mutual fund fees?

It’s important to be aware of all the mutual fund fees associated with any fund you invest in since they affect your bottom line.

You can find a detailed description of the fees a fund charges in the fund’s prospectus. Be sure to review the prospectus before making an investment decision.

Types of Mutual Fund Fees

Mutual Fund Fees charged on an ongoing basis:

Management fees. These fees pay the fund’s portfolio manager.

12b-1 fees. These fees, capped at 1 percent of your assets in the fund annually, are taken out of the fund’s assets to pay for the cost of marketing and selling the fund, for some shareholder services, and sometimes to pay employee bonuses.

Other expenses. This miscellaneous category includes the costs of providing services to shareholders outside of the expenses covered by 12b-1 fees or portfolio management fees. You also pay transaction fees for the trades the fund makes, though this amount is not reported separately as the other fees are.

Mutual Fund Fees based on your situation or actions you may take:

Account fees. Funds may charge you a separate fee to maintain your account, especially if your investment falls below a set dollar amount.

Redemption fees. To discourage very short-term trading, funds often charge a redemption fee to investors who sell shares shortly after buying them. Redemption fees may be charged anywhere from a few days to over a year. So it’s important to understand if and how your fund assesses redemption fees before you buy, especially if you think you might need to sell your shares shortly after purchasing them.

Exchange fees. Some funds also charge exchange fees for moving your money from one fund to another fund offered by the same investment company.

Purchase fees. Whether or not a fund charges a front-end sales charge, it may assess a purchase fee at the time you buy shares of the fund.

Look for a number called the fund’s Total Annual Fund Operating Expenses, otherwise known as the fund’s expense ratio. This number will tell you the percentage of the fund’s total assets that goes toward paying its recurring fees every year. The higher the fund’s fees, the greater its handicap in terms of doing better than the overall market as measured by the appropriate benchmark.

You should also be aware of transaction fees, which the mutual fund pays to a brokerage firm to execute its buy and sell orders. Those fees are not included in the expense ratio, but are subtracted before the fund’s return is calculated. The more the fund buys and sells in its portfolio, which is reported as its turnover rate, the higher its transaction costs may be.

The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. For information on the firm please visit www.whitesecuritieslaw.com.

For a free consultation with a securities attorney, please call The White Law Group at 1-888-637-5510.